The federal government tomorrow will open bidding for one of the biggest telecommunications contracts in history.
The General Services Administration will brief 74 companies on bidding procedures for a 10-year long-distance service contract worth $4.2 billion. The GSA is looking for a new telecommunications service to handle the federal government's long-distance voice, data and video traffic needs.
GSA will award the contract in 1987, with service expected to begin in 1989, said Bernard J. Bennington, the system's director.
"It's a very, very exciting procurement -- large enough to affect the business strategies of some of these companies," said Bennington. "We are going out to buy a service. . . . We don't care if the vendor provides it with tin cans and string as long as its the right service."
Until now, the GSA has procured 1.5 billion minutes of long-distance calling a year from American Telephone & Telegraph Co. and a variety of AT&T competitors, said Bennington.
Currently, the government saves about 12 percent in long-distance costs using AT&T competitors such as MCI Communications Corp. and GTE/Sprint, but plans to increase the savings "substantially" with a new service, Bennington said. In 1984, the government spent $424 million on its long-distance bill, and will spend about $450 million in fiscal year 1985, he said.
While AT&T has held about 88 percent of the government's long-distance business, its virtual monopoly over a large slice of long-distance business could be reversed. "I don't think AT&T has an edge over any other company," said Bennington. "Two years ago, it would not have been an open procurement -- we've been waiting for the industry to mature.
"We expect the money to be well-spread around, there is no one company that can provide all the services so we expect plenty of subcontractors in this," he added.
The idea for a new system to handle long-distance telecommunications traffic for federal agencies began in 1981, when AT&T withdrew a bulk rate under which GSA bought long-distance service, Bennington said. During the 1970s, the federal government had shaved its long-distance bill by about $1.25 billion under the bulk rate, he said.
At the same time, the government's telecommunications needs began to change. About 15 percent of the telecommunications traffic the federal government currently generates is low-speed data. By 1990, however, the government will send more data than voice traffic, said Bennington. In some locations, the government will require full motion video services.
Three groups of companies have expressed interest in bidding on the system so far.
Long-distance companies such as AT&T and GTE Corp. have approached the GSA, as well as traditional engineering companies such as Ford Aerospace and Honeywell, said Bennington. Lastly, GSA has had interest in the project from regional telephone companies, among them U S West.